Let Blue Ridge Appraisal and Consulting help you figure out if you can eliminate your PMIA 20% down payment is usually the standard when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a borrower doesn't pay.
During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they obtain the money, and they are covered if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the deficits.
How buyers can refrain from paying PMIThe Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen homeowners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your North Carolina home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not adhere to national trends and/or your home could have gained equity before things declined. So even when nationwide trends indicate declining home values, you should understand that real estate is local.
The toughest thing for almost all people to figure out is just when their home's equity goes over the 20% point. An accredited, North Carolina licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Blue Ridge Appraisal and Consulting, we know when property values have risen or declined. We're masters at determining value trends in Asheville, Buncombe County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
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